Software development has become an essential component of modern businesses, providing organizations with the tools and technology they need to streamline processes, improve efficiency, and enhance the overall customer experience. Whether you are looking to develop a custom software application, build a website, or create a new mobile app, the cost of software development is an important consideration.

There are different factors that can impact the cost of a software development project, which is why it can be challenging to determine how much you should budget for your project.

It is important to take into consideration that there is no universal formula that can give you an exact estimate of the cost of the software you wish to get developed. There are, however, key factors that help you get an estimate, as well as help you in deciding in which direction to move your project.

We will go through the factors that determine the cost of your project and give you advice on how to choose the best option for your project, your needs and requirements.

The more time you invest in planning your project, the less money you will spend in the end.

Even your initial budget plan may need to change as the project progresses, due to different circumstances, but more elaborate planning will decrease the chances of having to spend far greater amounts of money.

Below is the Code of Uncertainty, which portrays how, at the beginning of the project, it is not possible to make a completely accurate estimate. However, as the details of the project are more clearly visible through time and after finishing particular stages of software development, the accuracy of the estimate increases.

Additionally, this accuracy can be increased even at the beginning if you take all the important factors into account, and don’t limit yourself and your estimate only on making a general description. You need to describe and define all your specifications as clearly as possible.

Key factors in estimating software development cost

Key factors refer both to the estimates you make regarding your requirements and needs, and some, often unavoidable, unpredictable factors which you also need to consider and take into account to make your estimate as realistic as possible.

To start with this very complicated process, but a process worth your while, you should first determine the needed scope of work for your project. This refers to the type of the project, its size and the complexity of your desired features.

Type of software project

Perhaps you might want to build a project that is a web-based solution. Perhaps your project is simply adding on new features or updates to a software product that has already been developed, or is even already in use. You might also want to build a completely new and custom software solution. Starting from the lowest level, or, rather, the most simple one, there are four types of possible software products:

• Web development project. A custom web-based software development project, built according to the client’s requirements.
• Software integration project. Custom code to create additional capabilities, including plugins or different packages.
• Software modification project. Enhancements and modifications to an existing software product, including bug fixes.
• New software development project. A standalone software application, involving custom development.

This is your first step, determining what precisely you need and what sort of project you have on your hands. Each of these types requires a different approach, a different team size and range of professional skills. This step, along with the defined project size and the complexity of features, helps build the first part of the project cost estimate, as well as estimate its duration.

Size of software project

The bigger the size of your project, the bigger its final cost. Generally, the size of the project is correlated with its complexity, and thus also with the number of people involved, the expertise needed to complete it, as well as with the needed planning and, ultimately, testing.

With regards to the size, software development projects can be divided into:

• Small software projects. These projects usually involve minor changes, such as bug fixes or tweaks to an existing software. Client and development team interaction is also minimal.
• Medium software projects. These are often standalone features and integrations, with clearly defined specifications and scope of deliverables, or a series of fixes and tweaks. Small mobile applications or web interfaces, with, typically, a single source of data, fall under this category. Unlike with small projects, there is more communication between a client and a development team, which also affects the final cost.
• Large software projects. These are large endeavors that include far more complexity. They entail integrating multiple systems, incorporating a database, implementing security and logging features, adopting a scalable and maintainable framework, and creating multi-platform applications (available for macOS, Windows, Linux, iOS, Android, and web). These projects also demand extensive interaction with clients, including daily technical team calls, weekly status updates to higher management, and extensive design sessions and milestone agreements.
• Enterprise software projects. These are even more complex and robust solutions than large software products. Almost exclusively built upon an underlying framework, enterprise sized projects put a major focus on security and data integrity. As they generally prepare for substantial amounts of traffic, they cannot tolerate errors or downtime. Additionally, the client and the IT team communication is at the highest level, and it has to be seamless to develop a successful project.

Based on estimating your project type and size, you can determine how long it will take to finish it, which is an important step in determining the final cost.

Project team size

Next on the list is determining the size of your development team. What needs to be taken into account are the required team roles and staff seniority, which are related to the size and complexity of the project they are working on.

• Project roles. Generally, a project team will consist of, at least, three roles: project manager, developer and tester roles. Depending on the size and the complexity of your project, the number of people in those roles will also be determined. Additionally, for particular projects, generally the smaller ones, a single person can fulfill different roles. For example, a developer may be a tester as well, or a project manager may do the work of a business analyst along with their own work. With larger projects, this should not be the case. Next to these three roles, as mentioned, you may need a business analyst and/or a UX/UI designer.
• Seniority level. With regards to the final cost, the experience of the individuals on your team also plays a major role. Again, depending on your requirements and the complexity of the desired features, the work may be done by junior, mid or senior developers. All are paid accordingly.

Hiring models and locations

When you are assembling the team that will work on your project, you need to consider different hiring models, which can all also affect the final cost of software development. You can choose to work with your in-house team of software developers and other professionals, that is if you have them, or choose to outsource the work to an outside partner. The options are the following:

• In-house team. This means having a group of people who work as a part of your company - communication is easier, there are no time-zone differences, nor are there language or cultural barriers. However, you may need to go through the process of recruiting, selecting and hiring, which will additionally waste your resources, along with taking care of all the additional administrative costs like taxes and providing them with necessary equipment (both hardware and software).
• Freelancers. This is a cheaper option and one that gives you an additional benefit of accessing experts from all over the world. However, you do take risks in the areas of control, security and final product quality, as you can never be sure who exactly you are working with. Freelancers make for a good solution for smaller projects, where hiring one or two people can help you achieve your goals.
• Outsourcing company. Like freelancing, this also has a major impact on the final cost of your project, reducing hourly prices by as much as 40%, while still providing top quality products and experienced teams of required professionals. It still requires careful planning before choosing the right partner for your project and business.

Here is how software development hourly prices differ around the globe and why it might be a good option to start thinking globally and outsource your work to Asia or, optimally, Eastern Europe.

Referring to the above mentioned cost differences, we might nudge you in the direction of outsourcing software development. No matter the size and type of your project, it is the price of labor that will ultimately have the largest influence on the overall cost of the project.

Remote work and individuals working remotely have proven time and time again that the geographical location of the experts hired makes ultimately no difference for the outcome of the project. In other words, choosing the remote outsourcing option would in no way impact the quality, but, on the other hand, it would largely affect the final cost.

To elaborate on this further, there are two major factors that need to be considered. The first one is the cost of living and the accompanying salary range for developers around the world.

The cost of living is the number one reason why choosing a software developer or a software development company from regions such as Eastern Europe results in far lower rates. In fact, the difference in salaries between a software developer from the US vs, say, one from Croatia may be as much as 50% to 100%. Let’s compare the statistics for average yearly salaries of software developers based on different sources and research.

Additionally, keep in mind that these estimates include all seniorities, meaning juniors are paid less than the average, while senior developers may be paid far more.

On top of this, you should definitely not ignore other expenses, which were mentioned earlier, as another major factor affecting the project cost. This refers to stages of acquiring new local in-house employees, such as the cost of recruiting, hiring, onboarding and training, as well as taxes, licenses and equipment, without which the work cannot be done. With outsourcing, all of this can be skipped, which will result in a significant decrease in the final cost of your project - with no effect to the quality whatsoever.

Technologies

The choice of the technologies needed for the development of your software product is directly related to the cost as well. Not all developers nor all technologies are equally paid. Modern technologies like AI, augmented reality or blockchain may come at a price. While they do not require some special equipment, you are paying for the rare knowledge and the skills of developers. The choice depends on your requirements and needs, as well as the scope of the project. Here are some other factors related to the choice of technology that can affect your final price.

• Development time. Different technologies have different learning curves and development efficiencies, which can impact the amount of time it takes to develop a solution. Technologies that are more widely used and have a larger developer community tend to be faster to develop in, as there are more resources available for troubleshooting and development.
• Developer availability. The cost of developing a solution can be impacted by the availability of developers with expertise in a particular technology. Technologies that are in high demand may have a higher cost for development, as there is a limited pool of experienced developers.
• Maintenance. The cost of maintaining a solution over time can be impacted by the technology used as technologies that have a larger community and are widely adopted, as mentioned, tend to have more resources available for troubleshooting and fixing bugs, all of which the cost of maintenance.
• Scalability. Some technologies are better suited for building scalable solutions than others, which can impact the cost of developing and maintaining the solution over time. Integrations. Some technologies may have built-in support for integrating with other systems, while others may require more custom development to achieve the same result.
• Licenses. The cost of licensing the technology used can also impact the final cost of a software development project. Some technologies may have open-source or free options, while others may require the purchase of a license for each developer or for each deployment of the solution.

Rough estimates

When all of these factors are summed up, we can make rough estimates on the cost of a particular software development project.

Keep in mind, these ranges vary greatly as the factors that influence them are complex. This is why detailed planning and analysis is required at the beginning of your project for you to be able to plan your project budget.

If the project scope or its requirements are not clearly defined at the beginning of the project, it is impossible to make a correct estimate. Adding or changing the scope and the requirements once the project has already started with the development phase, leads not only to a cost increase, but also to a waste of other resources.

You sometimes may have an unclear set of project requirements and even the deadlines, but, in this case, you should also prepare not to limit your budget since the initial investment will inevitably change as the project changes.

To sum up, every project is unique. There is no formula that can get you the exact amount you will have to pay for your project. What you need instead is a careful analysis and estimation, along with a good and experienced team.

Here at Mono, we can provide you with a team that will get you to your goal. We are also experienced in conducting project cost estimates, so, even if you yourself do not have experience, you can rely on us. Let us show you!